Thai woman sends husband to prison for raping 13 year old niece

[Time Traveller]

I would like to ask any American citizens who live permanently outside of the US but file annual tax returns to the IRS. My question is if you have capital gains - for example through investment in the Stock Exchange of Thailand - which are tax exempt in the country of your residence, do you still have to pay tax on these to the IRS?

Please also specify, if the gain is less than the 91,000 foreign income exclusion and income from all sources (incl CG) is less than this. Would you still have to pay any tax?

BTW, I'm not an American and have never filed US federal taxes either.

[vpi78]

Yes, all world-wide income is taxable for US citizens.

You seem to e referring to the 911 exclusion of $91,000 on earned income, i.e., that exclusion does not apply to capital gains. You could roll the dice that the foreign company's dividends are not subject to IRS scrutiny and just not report it.

BTW, most of us find it better to qualify under the foreign residency test rather than the 911 exclusion. One of the advantages is you are not restricted to 35 days presence per cycle in the US that applies to the 911 exclusion.

BTW-2, you should also report any foreign bank accounts you have which exceed $10,000. That's a separate report and different agency that the IRS.

[el jefe]

vpi78's answer above is spot on.

But just to clarify his "btw-2", it's not just accounts with over $10,000 that need to be reported to the US Treasury Dept. If you have over $10,000 in foreign accounts in aggregate, all accounts must be reported. ie - if you have an account in Laos with $1000, a joint account here with $1500, and an account in your own name with $8000, you must file the form to report them all.

[Time Traveller]

Ok vpi78 and el jefe, thanks for your replies.

So if a US citizen resided for 365 days in say Thailand and total income was by only foreign earned salary of less than $90k then there would be no US Federal tax liability (assuming local taxes paid where they reside).

However, if this person had Capital gains of just say $20k and there was no other income, then there is a US federal tax liabilty (even though there may be not capital gains tax in the resident country), is this correct ?

[Langsuan Man]

Ok vpi78 and el jefe, thanks for your replies.

So if a US citizen resided for 365 days in say Thailand and total income was by only foreign earned salary of less than $90k then there would be no US Federal tax liability (assuming local taxes paid where they reside).

However, if this person had Capital gains of just say $20k and there was no other income, then there is a US federal tax liabilty (even though there may be not capital gains tax in the resident country), is this correct ?

Yes, the "salary" is exempt from income taxes and is not dependent upon whether or not foreign taxes were paid.

Captal gains, Interest, Stock splits, Dividends, Royalties, etc. are not tax free no matter where you are located or for how long, since the money is earned in the US (assuming that your are talking about US Capital Gains and other passive forms of income)

Edited December 19, 2011 by Langsuan Man

[OriginalPoster]

Ok vpi78 and el jefe, thanks for your replies.

So if a US citizen resided for 365 days in say Thailand and total income was by only foreign earned salary of less than $90k then there would be no US Federal tax liability (assuming local taxes paid where they reside).

However, if this person had Capital gains of just say $20k and there was no other income, then there is a US federal tax liabilty (even though there may be not capital gains tax in the resident country), is this correct ?

You might want to get a copy of TurboTax as it seems to correctly handle scenarious such as the one that you are describing.

There definitely would be US tax on the capital gains but calculating the amount of tax due may not be intuitively obvious. Even though you may not owe any tax on your earned income since it's less than $90K, how much you tax you owe on the capital gains may still be a function of how much earned income you had during the tax year in which the capital gain was realized.

[JimGant]

There definitely would be US tax on the capital gains but calculating the amount of tax due may not be intuitively obvious.

Well, it would be subject to US tax, as part of worldwide income, but it might take a lot of doing to reach the margin where this would apply. For example (I'm assuming long term cap gains -- short term, those less than a year, are treated as ordinary income), there is zero cap gain tax if your taxable income is $69,000 or less, meaning you're in the 15% tax bracket, or less (for married, filing jointly). And a taxable income of $69k means your adjusted gross income is $88k (two exemptions, standard deduction). Thus, if all your earned, and unearned, income -- including foreign wages over and above the exemption, and cap gains -- don't exceed $88k, zip cap gains tax. Over that amount, it starts dribbling in at 15% -- for all marginal tax brackets at 25%, and above.

Oh, if it's your house in Thailand that you sell for a profit, same rules and exemptions apply as if it were your stateside house (lived in 2 of last 5 years; $250k cap gain exemption single, $500k filing jointly).

BTW, I'm not an American and have never filed US federal taxes either.

Why the curiosity? Trying to figure out if the Revolution was worth it?